Absence Of Creditor's Name In Balance Sheet Does Not Negate Acknowledgment Of Debt: NCLT Kolkata

The National Company Law Tribunal (NCLT), Kolkata, special bench, consisting of Smt. Bidisha Banerjee (Member - Judicial) and Shri Sameer Kakar (Member - Technical), has allowed an application filed by the State Bank of India under Section 7 of the IBC seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The bench observed that the absence of the financial creditor's name in the corporate debtor's balance sheet does not vitiate the acknowledgment of debt if the figures shown are consistent with the debt acknowledged in the balance sheet. The bench also ruled that the acknowledgment of debt in the balance sheet and OTS validly extends the limitation under Section 18 of the Limitation Act for the purpose of CIRP. Background The State Bank of India (SBI) filed a petition before the adjudicating authority under Section 7 of the IBC, seeking the initiation of CIRP against the corporate debtor. The financial creditor alleged a debt of Rs. 111.7 on the corporate debtor arising out of credit facilities sanctioned and renewed between 2008 and 2014. Subsequently, the accounts were classified as the NPA on March 31, 2014, and the financial creditor issued the demand notice on September 02, 2015. Contention of the Parties The financial creditor referred to the balance sheet for the financial years 31 March, 2016, 31 March, 2018, 31 March, 2020, and 31 March, 2021 submitted by the corporate debtor, wherein the corporate debtor has admitted its default in repayment of the loan taken from the financial creditor. The petitioner submitted that all acknowledgment in the balance sheet shall be deemed to be acknowledgment of debt under Section 18 of the Limitation Act. To contend this, the financial creditor has placed reliance on Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal and Another 2021 SCC Online 321. The financial creditor also contended that the One Time Settlement letter (OTS), where it has been admitted that the debt lies with the financial creditor, should be treated as the acknowledgment of debt under Section 18 of the Limitation Act. Per Contra, the corporate debtor contended that the revival letter neither mentions the quantum nor the default. Also, the balance sheets do not mention the name of the financial creditor, i.e., State Bank of India. The respondent also highlighted that the OTS proposal cannot extend the limitation that has expired long back. Observations of the Adjudicating Authority The tribunal observed that the corporate debtor has admitted that an OTS proposal was given to the financial creditor, which is a clear acknowledgment of debt and default. The bench observed that although SBI was not explicitly in the balance sheets, the figures shown were consistent with the debt acknowledged in the balance sheet. The bench referred to the Hon'ble Supreme Court's ruling in the case of Anuj Jain v. Axis Bank Limited and held that for a debt to become financial debt, the basic element is that it ought to be a disbursal against the consideration for time value of money. The adjudicating authority lastly observed that all the requirements of debt, default, limitation, and threshold are met and hence admitted the application for CIRP. Case Title: State Bank of India v. S R Timber Products Private Case Number: CP (IB) No. 27/KB/2024 For Applicant: Mr. Snehasish Chakraborty, Advocate For Respondent: Mr Shaunak Mitra, Advocate and Mr. Sourav Jain, Advocate Bench: Smt. Bidisha Banerjee (Member - Judicial) and Shri Sameer Kakar (Member - Technical) Order Date: 07/04/2025 Click here to download Order/Judgement

Absence Of Creditor's Name In Balance Sheet Does Not Negate Acknowledgment Of Debt: NCLT Kolkata

Mohd.Rehan Ali

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